A commercial general liability insurer has two duties to its insured when it comes to third-party claims: 1) the duty to defend its insured and 2) the duty to indemnify its insured.
The insurer’s duty to defend its insured will always be broader than its duty to indemnify because this duty is triggered by the allegations in the lawsuit. (For this precise reason, insurers will oftentimes defend their insured under a reservation of rights.) The duty to defend is a very important duty as it is the first duty that typically comes into play when a third-party claim / action is initiated against the insured. Getting the insurer on board to provide a defense is an initial focus. One that cannot be neglected or overlooked.
If an insurer denies or refuses to defend its insured, this means the insurer is denying coverage outright. In other words, the insurer is coming out of the gate denying the duty to indemnify the insured and, as such, denying the duty to defend. There is no reservation of rights because the insurer is not going to provide a defense based on its denial of coverage. When this happens, it is imperative that the insured consult with counsel. Not later or tomorrow or down the road. But, now! Immediately. At a minimum, an insured wants to ensure that its insurer is picking-up the broader duty to defend and needs to make sure its rights are protected and preserved.
In Mid-Continent Casualty Company v. Flora-Tech PlantScapes, Inc., 42 Fla. L. Weekly D1649a (Fla. 3d DCA 2017), a general contractor initiated a third-party claim against a landscaper in a personal injury action. (It is uncertain whether the landscaper was hired by the general contractor or the developer.) The landscaper’s commercial general liability insurer denied coverage and, therefore, refused to defend the insured in the lawsuit. As a result, the landscaper initiated a fourth-party claim against its own insurer for coverage seeking a declaration that its insurer had a duty to defend it in the lawsuit and indemnify it for the third-party claims being asserted against it. Both the landscaper and its insurer filed motions for summary judgment and the trial court declared that the insurer had a duty to defend its insured, but that it was not making a determination as to the insurer’s duty to indemnify. From the insured-landscaper’s standpoint, this likely was fine because the landscaper was initially looking for a declaration that its insurer had a duty to provide it a defense in the personal injury action.
Please contact David Adelstein at email@example.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.